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LTC Cash Voucher Scheme: Here’s All You Should Know

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In a bid to lift consumer demand as it came to fore that savings of government and organized sector staff was seen rising amid the pandemic, Finance Minister Nirmala Sitharaman on Monday announced the leave travel concession (LTC) cash voucher scheme.

 LTC Cash Voucher Scheme: Here’s All You Should Know
 

What is LTC Cash voucher scheme?

Here in the scheme currently rolled out exclusively for government employees enables them to receive cash in lieu of leave encashment together with 3 times ticket fare for purchase of items that attract GST of 12 percent or more. "Only digital transactions are allowed, GST invoice have to be produced," said Nirmala Sitharaman while announcing such details.

"The estimated cost of LTC Cash Voucher Scheme for central government is ₹5,675 crore for PSBs and for PSUs it is ₹1,900 crore. The tax concessions for LTC tickets are available for state government and private sector too, if they choose to give such facility, these employees too can benefit," she said.

What this scheme has for private sector employees?

"Private sector organisations can review their employee compensation structure to enable their employees to take advantage of the announcements, eg where there is an LTA component as part of the flexi-components in the CTC basket. Of course, this is subject to how the relevant Income tax rules are amended", Alok Agrawal, Partner, Deloitte Haskins & Sells LLP, said.

Here's what you need to understand

Supposing you have a full financial year LTA of Rs. 100000 then for claiming it as a tax-free allowance you either need to produce tickets or pay Rs. 30000 tax. Now, the government is offering you a relaxation where in you need not pay the tax even without going to a vacation but here you need to spend at least items worth Rs. 3 lakh that attract a GST of 12 percent or more. Also, in the list there is included premium paid towards term insurance as well as ULIPs as it attracts 18% GST.

 

Now for private sector employees for whom LTC is usually one month of the basic salary to save tax on it, one needs to spend three times the amount to purchase the goods or services that attract GST of 12%. So, for those who have planned expenditure for such goods and have spared cash can consider capitalizing on the deal to claim Rs. 30000. For others who are already facing uncertainty amid the pandemic, the idea shall not be worthwhile.

Also, rules in relation to LTA are not very clear for those taxpayers who are opting for new tax regime where one can pay tax at a lower rate by giving up all of the exemptions that includes those on LTA as well.

GoodReturns.in

Read more about: ltc lta
Story first published: Wednesday, October 14, 2020, 7:09 [IST]
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